Electric Vehicle Quotas Imposed on Carmakers Will Drive Up Car Prices

Canada Electric Vehicle EV Credit Quotas System Imposed on Carmakers Will Drive Up Car Prices Montreal Economic Institute MEI



EV Sales Quota & Credit System

Starting with their 2018 models, carmakers will be faced with electric and hybrid vehicle sales quotas. Most carmakers will have to accumulate a number of “credits” equal to 3.5% of their sales, increasing gradually to 22% in 2025. Carmakers that fall short will have to buy the credits they’re missing, either from other carmakers that have accumulated surplus credits or directly from the government.


Ambitious Targets

These quotas will therefore increase the marginal cost of a conventional vehicle, and so the price that consumers must pay will also increase. At 3.5%, the increase in the marginal cost will be $175 in 2018, but as the quota increases to 22% by 2025, that extra cost will also increase, to $1,100 per vehicle.

It is likely that carmakers will fall short of these targets. First of all, there were just 13,464 electric cars in Quebec in 2016, or roughly 0.26% of the total vehicle fleet, which is far from the stated objective of having 100,000 electric cars on Quebec roads in 2020. Secondly, the quota of 3.5% for 2018 is above the present share of total motor vehicle sales that are electric and hybrid vehicles, which stands at 1.08%. Moreover, certain carmakers produce no electric cars at all.

Hybrid Electric Vehicle EV Quotas credit system Imposed on Carmakers Will Drive Up Car Prices from 2018 2025 Chart by MEI Montreal Economic Institute


And the Winner Is

The only real winners from this policy will be carmakers that produce exclusively electric and hybrid cars and those with total sales below 4,500 vehicles. These carmakers will obtain up to four credits per vehicle sold, most of which they would then be able to resell. This is the equivalent of a subsidy of $20,000 per vehicle for these manufacturers, on top of the existing purchase subsidies for consumers, which are an inefficient and very expensive way of reducing GHG emissions.

The Viewpoint entitled “Electric Vehicle Sales Quotas: A Tax in Disguise” was prepared by Germain Belzile, Senior Associate Researcher at the Montreal Economic Institute (MEI).

SOURCE Montreal Economic Institute


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